In the discussion on the Fama-French model, reference is made to the return of a “zero-net investment” in certain assets (e.g. large-cap stock and small cap stocks, or high book-to-market portfolios and low book-to-market portfolios). What is meant by this concept of a “zero net investment”?
Go long for X amount on the Large Cap stock and short for the same X amount on the Small Cap stock. Net Investment - since you are long X and short X = 0.
wouldnt u first short $X amount of small cap and use to the proceeds to buy $X amount of large cap?